By Luna Atamian
Corporations have made significant progress on the sustainability front, but the work done to date mainly focused on making sure companies do less harm, protecting reputation and managing risk. In other words, the work focuses on ‘minding the gap’ between society and corporations.
However, given the disconnect and fragility of the relationship between society, business and institutions, minding the gap is simply not enough. Business needs to tread carefully and thoughtfully as it works out how to start mending the gaps and reconnecting with society more effectively.
On March 9, Salterbaxter decided to bring great minds together during the U.S. Sustainable Business Forum to discuss the changing role of business in society, the need for business to radically reconnect with stakeholders, and how to do this. If you missed the discussion with speakers including McKinsey, BNY Mellon, DSM and Novozymes, we’ve compiled some of the highlights for your reference.
Breaking this anti-business sentiment is possible, but it requires reconnecting corporate social responsibility with real commercial activities and rethinking what leadership means. The ability to effectively connect with society -- and its real needs -- and to integrate societal and environmental issues deeply into the business model is crucial and can boost profitability and competitiveness for corporations.
Robin Nuttall, partner at McKinsey & Co. and co-author of “Connect”, said the shares of companies that connect outperform those of competitors by 2 percent every year, amounting to a performance boost of 20 percent over a decade. The book also identifies four tenets of “connected leadership” that companies – and leadership -- can adopt to improve profitability and relationship with society.
Let’s start with partnerships. BNY Mellon, for instance, just released a new study in partnership with the U.N. Foundation, one of its stakeholders, entitled Return on Equality. “This is a great story of stakeholder engagement and partnership at its best," said Heidi DuBois, global head of CSR and social investing at BNY Mellon. "We have had a partnership with the UN Foundation for several years now and together, we decided to focus on Goal 5, which focuses on achieving gender equality and empower all women and girls.”
Another interesting example is Novozymes. Claus Stig Pedersen, head of corporate sustainability for Novozymes, spoke about how partnerships and the U.N. Sustainable Development Goals (SDGs) have guided the company's long-term targets for fulfilling the company’s stated purpose of finding biological answers for better lives in a growing world. The SDGs helped companies prioritize their activities and attract the right partners. Similarly, working with the right partners helped Novozymes develop better, more sustainable products.
Finally, we all know that CSR reporting is important for transparency and communications purposes but it’s also a great way to engage with stakeholders. It can be both the culmination and kickoff of a year-long engagement process with experts, managers and employees, and external stakeholders with different stages that bring the company and its different stakeholders together, from the materiality analysis through to engagement around the results.
Indeed, linking executive bonuses exclusively to short-term financial targets will incentivize executives to deliver short-term results – results that are not sustainable.
Hugh Welsh, president of DSM North America, spoke about the company started to link all managers’ compensation to sustainability in 2010, with targets related to greenhouse gas emissions, energy and water usage, eco-friendly product development, and employee engagement, besides traditional revenue targets. The result was real, measurable progress.
Behavioral economics analyzes how choices are presented to consumers and the environments in which choices are made. Supermarkets, for instance, are usually focused on incentivizing consumer decisions that will maximize revenue. In other words, products that bring the greatest profits are those that are in the “hotspots," where purchases are most likely to occur.
With behavioral economics, stores and supermarkets have the power to influence consumer choice architecture to focus on sustainability. By placing sustainable products in these “hotspots” or incorporating specific labels to recognize these products, supermarkets can make it easier for consumers to select and buy sustainable products. Thus, by better understanding consumer behaviors, we can incentivize the sale of sustainable products.
Whether it’s a connected leadership model, effective partnership with stakeholders or better understanding incentives and behaviors, one thing remains certain: the business community needs to Step Up and reconnect with society. And there are some great examples of companies out there who are taking the lead and doing just that.
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Luna Atamian is a consultant at Salterbaxter. She advises leading global companies and brands on sustainability and corporate social responsibility strategy and communications.
Salterbaxter helps companies and brands step up to the challenge of the changing relationship between business and society. We combine smart strategy, savvy insights and sharp creativity to help businesses do different things, not just say different things. We work with our clients across the whole spectrum of strategy and communications – from strategy insight and development to stakeholder engagement, influencer campaigns, and reporting programs. Everything we do helps businesses make a more positive impact on the world.
Please contact Salterbaxter to attend our next event on April 27th on the subject of materiality or core issues assessment. The event is free and will take place in NYC. Our guest speaker will be Ken Gustavsen, Executive Director, Corporate Responsibility, Merck & Co., Inc.